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2011 (1) KCCR 118
KARNATAKA HIGH COURT (CIRCUIT BENCH AT GULBARGA)
Subhash B. Adi, J
Bharathy - Petitioner
Versus
Benigopal Jhawar - Respondent
Criminal Petition No. 8993 of 2009,
Decided on 8.10.2009
NEGOTIABLE INSTRUMENTS ACT, 1881 - Sections 138 & 141: [Subhash B. Adi, J] Complaint under Section 138 of Negotiable Instruments Act, 1882 against the Company (A-1), Managing Director (A-2) and Finance Manager (A-3) - Cognizance of - Issue of Summons to the Accused - Order of the Magistrate -Challenge to - Prayer to quash the proceedings by Accused No.3 - Consideration of-Complaint under Section 138 of the N.I. Act against employee of the Company -Sustainability -Issue of notice to all the accused as required under Sections 138 and 141 of the Negotiable Instrument Act - Held, Even if the company is accused, company alone cannot be prosecuted. The requirement of Section 141 is company as well as the person incharge and responsible, necessarily means the drawer and the other person who are also responsible. Hence, in case of company is drawer under Section 138 of the N.I. Act, for the purpose of issue of notice is the person who is responsible and incharge of day to day business of the company at the time of commission of the offence. No doubt the company may be drawer of the Cheque, however in case of offence against the company, the company alone cannot be prosecuted or punished with imprisonment. Necessarily the persons incharge and responsible for the business of company is also necessary as per Section 141 of N.I. Act. Further, Drawer for the purpose of company means company and the persons responsible and incharge of the conduct of the business of the company. Section 138 (1) cannot be read in isolation, it has to be read along with Section 141 of N.I. Act in case of offence against company. Section 138 and Section 141 required to be considered harmoniously. If the offence is committed by company, person incharge and responsible for the conduct of business of the company is also guilty of an offence along with the company, the company alone cannot be prosecuted along with company, the person responsible have to be prosecuted. Hence notice is necessary to all the accused. On facts held, The petitioner was an employee he has not been issued with the notice, he had no opportunity to reply. There is a possibility, in case of a reply, the complainant might not have proceeded against petitioner. The complainant admittedly has not issued notice to the petitioner calling upon him to make payment within 15 days, it cannot be held that he had committed an offence punishable under Section 138, as there is no compliance with the requirement of proviso to Section 138 of N.I. Act. When the basic requirement of Section 138 of N.I. Act is not complied, there is no reason for this accused to face trial when the complaint does not disclose the ingredient of Section 138 of N.I. Act, the complaint does not make out prima facie case against the accused. Proceedings against A-3 was quashed.
Subhash B. Adi, J: Petitioner is accused No.3 in private complaint No.55/2008 (C.C. No.920/2008) pending on the file of JMFC-II, Raichur.
2. Respondent filed a private complaint under Section 200 of Cr.P.C. alleging that accused No.1 - the company, accused No.2 - the Managing Director, accused No.3 (petitioner) - the Finance Manager have committed an offence punishable under Section 138 of Negotiable Instruments Act.
3. The case of the complainant is that, in connection with purchase of 101 bales of full pressed cotton towards part payment, the accused had issued four cheques and two cheque;:; were presented for encashment. Both the cheques returned by the banker of the accused with an endorsement "PAYMENT STOPPED BY DRAWER". In this regard complainant issued:
a legal notice calling upon the accused to pay the said amount. However, the accused failed to pay the same. As such, complainant filed the complaint.
4. Learned Magistrate considering the averments in the complaint, sworn statement of the complainant and the material produced along with the complaint, found that there is a prima facie case to proceed against the accused and accordingly ordered for registration of case and issued summons to accused. At this stage, this petition has been filed.
5. Heard the learned Counsel Sri. Gourish S. Khashampur, for the petitioner and Sri. Shivakumar Kalloor, learned Counsel for the respondent.
6. The contention of the learned Counsel for the petitioner is that, petitioner is arrayed as accused No.3. He was a Finance Manager of the accused No.1 - Company. Petitioner was neither the Director nor he is incharge of the affairs of the company. He was only an employee working in accused No. 1- Company and since he has retired, is no more related to the company.
7. Second contention is that, accused No.1 is a company and accused. No.2 is a Managing Director and the petitioner has not been issued with legal or otherwise any notice in terms of Section 138 of Negotiable Instruments Act and without there being any demand as contemplated under Section 138, the complaint insofar as this petitioner is concerned is not maintainable. In this regard, he relied on a decision of the Apex Court reported in 2009 AIR sew 3836 in the matter of Ramaraj Singh Vs. State of M.P. and another and submitted that, there must be a specific averment as regards to the role played by the petitioner and complaint must contain the averment as regard to the person incharge and responsible for the conduct of business of the company and without such specific averment, only on the ground that the petitioner was an employee, petitioner cannot be held liable for the offence punishable under Section 138 of N.I. Act
8. Learned Counsel further relied on the judgment of the Apex Court and submitted that, Apex Court in identical circumstances in Ramaraj Singh case, where notice was not issued to the Director against whom the complaint was filed, has held that, the complaint is not maintainable for want of notice. He submitted that, an employee cannot be termed either as person incharge or responsible for the conduct of business of the company, if at all he had played any role, it would be on behalf of the company and at the direction Of the Directors of the Company and he cannot be alleged that he is responsible and incharge for the conduct of the business• of the company.
9. On the contrary, learned Counsel appearing for the respondent complainant submitted that, complaint discloses that the petitioner was a Finance Manager. Complaint also discloses that he was incharge and responsible for the conduct of business of the company. He relied on the provisions of Section 138 and Section 141 of N.I. Act and submitted that, Section 138 requires the notice to be given to the drawer of the cheque and the drawer of the cheque has been defined under Section 7 of the N.I. Act and submitted that "drawer" or "drawee" means maker of a bill of exchange or cheque is called the "drawer"; the person
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